Company Town : Move Over Sega--Here Come the Conglomerates : Multimedia: Big guys dominate the Consumer Electronics Show for the first time, at the expense of the independent video game publishers.
Guess who’s coming to the Consumer Electronics Show this week.
Not video game veteran Sega of America, for one. Nor Electronic Arts, the nation’s biggest independent publisher of interactive games. Several small game developers caught in a cash crunch also won’t be exhibiting this year.
Instead, the show in Chicago--where dozens of video game publishers and other electronics manufacturers gather annually to titillate retailers, customers and the media with previews of their Christmas season wares--will for the first time be dominated by entertainment companies such as 20th Century Fox, Walt Disney Co., MCA/Universal and the many-tentacled Viacom Inc. when it opens Thursday.
The shift in the show’s character may reflect a changing balance of power in the multimedia industry, from the traditional independent game publishers to big entertainment conglomerates with deep pockets and copyrights on well-known characters and stories.
The trend is not exactly being welcomed with open arms.
“Just because a bunch of Hollywood guys show up with ‘interactive’ on their business cards doesn’t mean they’re going to be successful,” says Electronic Arts Executive Vice President Bing Gordon, who will be at the show even though his company will not have a booth.
Added George Harrison, marketing director for Nintendo of America, of the new competitors in his industry: “It won’t necessarily be as easy as they might like to think.”
Nintendo, which will have its usual big presence at the show, plans to introduce a game featuring a gorilla called Donkey Kong that helped launch its business in the mid-1980s.
While original characters such as Nintendo’s Mario and Sega’s Sonic the Hedgehog have generated billions of dollars in revenue for the two video game companies, media executives argue that as the interactive software market broadens and production costs escalate, games based on cultural icons--such as Viacom’s “Beavis and Butt-head” (due out this fall) or Fox’s upcoming Macaulay Culkin film “Pagemaster”--will have the advantage.
“You take the property content owners, like Fox or MGM or Sony or any of the others, and we can now step into this industry and provide the consumer with great games and video clips from our libraries,” said Ted Hoff, chief of Fox’s new interactive division, which will be exhibiting an early version of the “Pagemaster” game in Chicago.
In the past, entertainment and publishing companies have typically licensed rights to their movies, books and TV shows that are to be turned into interactive software by developers specializing in multimedia. But lately, as technology advances and the market expands, nearly every media firm has formed an interactive publishing arm of its own.
The economic logic: A game based on a movie that sells a million copies might bring $5 million to the studio that licensed it. But the same studio might earn four or five times as much by creating and distributing the game itself.
Still, there is substantial risk. As movie executive-turned-video game evangelist Strauss Zelnick sees it, only 50% of games succeed, and only 30% of movies succeed. So a game based on an upcoming movie has a success probability of about 15%. And, says Time Warner Interactive President Terry Hershey, “in a business based on creativity, size is not going to predetermine your likelihood of success.”
Will Paramount Interactive’s “Star Trek: Deep Space Nine” game beat out Electronic Arts’ “Wing Commander 3”? Can Universal Interactive’s “Jurassic Park” game top start-up Crystal Dynamics’ “Crash and Burn”? Will Sony’s interactive “Frankenstein,” timed to coincide with the release of the TriStar movie in November, scare away sales from Virgin Interactive’s sequel to the popular “7th Guest” CD-ROM game?
The answers remain in the hands of the teen-age boys who still buy most of the video games sold in the United States. But if there was any doubt that the media conglomerates and the movie studios have finally arrived in Interactiveland, the convention this week should dispel them.
While old-timers such as Sega and Electronic Arts keep a low profile, says Fox’s Hoff, “we’ll have a very large booth representing Fox Interactive with our new logo, and 12 or 15 display stations. We are not approaching (the show) timidly.”
Never to be outdone, Disney is sending a full contingent of top executives, including Chairman Michael D. Eisner, Vice Chairman Roy Disney and studio Chairman Jeffrey Katzenberg to host a Disney World-esque extravaganza Friday morning to introduce the video game version of “The Lion King.” The company is also expected to announce a collaboration with Sony Corp.’s electronic publishing arm to develop an interactive CD-ROM based on 65 years of Mickey Mouse cartoons.
Universal Interactive Studios will be exhibiting its recently released first product, “Jurassic Park”; Time Warner Interactive will have a party to mark the consolidation of at least some of its parent company’s interactive divisions under one umbrella; Viacom New Media will have a huge booth encompassing its original new-media group as well as the recently acquired Paramount Interactive and Simon & Schuster Interactive.
Says Electronic Arts’ Gordon: “I hope the studios showing up with their interactive divisions get great people involved and add glamour and excitement at CES. Next year the show is in Philadelphia. It will be interesting to see how far the glamorous and exciting people in Hollywood are willing to travel to make a show of participation in the interactive business.”
